KPMG says it is on renewal path after series of audit scandals

 

KPMG South Africa has released a 45-page report laying out the measures it adopted as it tries to recover from the reputational damage it suffered after the revelation of irregular audit practices by some of its partners.

 

The group released its annual integrated report for 2018 on Thursday.

 

The auditor’s integrity took a knock following media scrutiny about its role in publishing the so-called SARS ‘rogue unit’ report – whose findings it has officially retracted; its role in the auditing of Gupta-affiliated entities; as well as the alleged improper conduct of at least two of its partners in the audit of VBS Mutual Bank.

In September 2017 KPMG’s top leadership quit following an investigation by KPMG International into the work it had done for SARS and Gupta-linked companies. Businesses then started to cut ties with the auditor.

The company was booted out of Business Leadership South Africa in September 2017, but readmitted in October last year.

In its 2018 Integrated Report, the auditor seeks to start winning back the public trust it lost by detailing what remedial actions it undertook over the past 18 months.

Here are five takeaways from the report. 

  1. Investigations

The group said that investigations, assisted by external advisers, into work done for Gupta entities, SARS and VBS Mutual Bank had been completed.

The report included a supplementary document with a summary of the findings and actions taken in the investigations, though this was not particularly detailed.

KPMG noted it had returned the R23m fee to SARS for the ‘rogue unit’ report it produced. In 2017, KPMG retracted the findings of controversial report and aplogised.

  1. Leadership

An independent non-executive chairman and director has[have?] been appointed to provided “greater objectivity and fresh thinking” to the firm, it said.

The company said it had also brought in a number of experienced KPMG partners from outside the country to enhance expertise of the local teams.

A new CEO, Ignatius Sehoole, will take up his position in May 2019. Sehoole replaces Nhlamulo Dlomu, who will be taking on a new global role at the firm.

Dlomu, in turn, had replaced Trevor Hoole who resigned in September 2017.

  1. Political awareness

KPMG said it has committed to being aware of the socio-political landscape when undertaking work in the public and private sectors.

  1. Job losses

As part of streamlining operations and to create a “realistically sized business”, employee numbers have been slashed from 3 298 to 2 317 over the past year, it said. This included the closure of smaller regional offices.

The auditor previously said that the closure of its regional offices in Bloemfontein, Mbombela, Polokwane and East London, was, in part due, to the termination of its contract to provide services to the Auditor-General. Dlomu told journalists in June 2018 that the decision to close the four regional hubs came as parts of the firm “simply just did not have enough business”.

  1. Gupta fees

The group said the process of redistributing the R47.8m in fees received from work for Gupta-related entities was underway.

This money is earmarked for NGOs involved mainly in education and anti-corruption initiatives, it said.

KPMG added it would cooperate with all the inquiries and investigations that have been instituted against the its or partners.

Source: fin24